Beware of "Scallywags"
Commentary by Rep. Mike Kelley (R-126)
In July of 2010, an announcement was made in Moberly that "Hong Kong based" Mamtek International would bring over 600 manufacturing jobs to that community. That company promised that it would produce the "SweetO" brand of sucralose, an artificial no-calorie sweetener like Splenda. The city of Moberly issued $39 million in industrial development bonds. The state of Missouri offered nearly $18 million in incentives. When the ground was broken for the plant, Governor Jay Nixon and former Governor Bob Holden were on hand. "SweetO" is just about to make Missouri's economy a little sweeter," Nixon reportedly said that day.
This sounded like great news for Randolph County where unemployment exceeded 10%. The promise was that 120 good paying jobs - $17 per hour - would be created by Christmas and up to 600 more jobs as assembly lines were added over the next few years. Officials bragged that the whole package was put together in the amazing time of 73 days and was supposed to include $8 million in private investment.
Several delays have occurred over the last several months but everything appeared to move forward this summer. Now this sweet deal has turned sour. Plant construction has halted. Mamtek has laid-off all of its employees. The company missed its first $2.2 million bond payment on August 1, 2011.
The public became aware of these problems when the bank that was the agent for these bonds released this statement on September 1: Unless the city of Moberly can find someone else to take over the project, the city appears liable for $39 million.
In this situation there were obvious clues that this proposal was too good to be true. I believe that the problems that eventually resulted in the default of this project would have been discovered if the state of Missouri and local developers had practiced "due diligence," the standard of care that should be exercised when dealing with someone else's money.
“The people of Moberly won Mamtek because of the warm reception and the kind of people you have here who went the extra mile, informing them why mid-Missouri here in Moberly is the right place to meet their business needs,” said former Missouri Governor Bob Holden at the groundbreaking ceremony.[As quoted by Chuck Embree, Jul. 26, 2010, Moberly Monitor.com]
Nixon was questioned at a recent news conference about the state's involvement. "I don't run the Department of Economic Development," he said, "and I don't work details at the ground level."
The Missouri Department of Economic Development now has made assurances that no state money has been paid to this ill-fated project because the laws authorizing these incentives require that actual jobs be created before payment is made. Despite the governor's denials, it is clear that local economic development officials were introduced to Mamtek International through the Missouri Department of Economic Development.
Despite his attempt to avoid responsibility, the governor who appointed the director of the Missouri Department of Economic Development and his appointees bear much of the responsibility for the mistakes made. It is apparent that the governor, through his appointees, did not exercise "due diligence."
Any investigation into Mamtek International would have raised red flags. Even a Google search of this company might have put these folks on notice.
Just before the deal was struck with Moberly, this company was in negotiations with officials from Bismarck, ND. In an article in the Bismarck Tribune posted on the Internet on May 7, 2010, Russ Staiger, president and CEO of the Bismarck-Mandan Development Association indicated that their city had declined a similar offer from Mamtek, calling information provided about the project, "a bit sketchy."
In a recent interview, Staiger described the company as having a "pushy" demeanor that made him uneasy. He recently told the Columbia Daily Tribune that "the business of economic development is full of carpet baggers and scallywags. You just have to be cautious."
While the company said it had a plant in Fujian Province, China, Janet Morales, editor and publisher of a weekly newspaper called The Moberly Mirror could find no evidence of one. She contacted trade publications and competitors, and found no one who knew of Mamtek. Due diligence, including contact with Staiger and Morales, might have avoided the bad decision to proceed with this project.
There have been several news reports recently that Mamtek was raising private capital by finding Chinese citizens so eager to become U.S. Citizens that they would invest $500,000 in the project to make them eligible to obtain a United States Visa. I believe that the state had a responsibility to carefully and cautiously look into this matter instead of expediting the approval to 73 days from the more normal approval period of 6 months. There also are some indications that at least one other Missouri community, Marshall, passed on this proposal.
Currently, investigations have begun by the Security and Exchange Commission, the Missouri Attorney General, the Randolph County prosecuting attorney and a Missouri Senate committee. Hopefully, this experience will cause the governor and his staff to be more cautious of the possibility that they are dealing with carpetbaggers and scallywags.
Editor's note: The highest-paid vendor for the defunct Mamtek U.S. Inc. project was a California company founded by former Mamtek CEO Bruce Cole that was paid $6.6 million from the proceeds of a $39 million bond issue. Some of this money was funneled through an apparent phony company called "Ramwell Industrial Inc.," similar in name to "Ramwell Industrial Ltd., a company Cole founded in 2001 using a Beverly Hills residential address. That company is not legitimate, according to laws of the state of California.
For an October 6, 2011 article by Rudi Keller in the Columbia Daily Tribune go here.